Borrowers are to get greater protections, with rules governing lenders set to be toughened.Walter Roban, the home affairs minister, described examples of how struggling borrowers had fallen foul of questionable lending practices amid a lack of regulation.In a virtual session of the House of Assembly, he said the Government planned to change the law to bring in a code of conduct for lenders and establish a tribunal to deal with complaints and arbitrate disagreements, bringing the island into line with many other jurisdictions.Amendments to the Consumer Protection Act 1999 will be introduced in the next session of the House, he added.The Act explicitly excludes from the definition of “goods” financial transactions with lenders and there is no regulated code of conduct for lenders, he said. Mr Roban told MPs: “Hence consumers and small businesses have little or no redress for unfair or inequitable conduct by lending agencies.” He added: “A home is often a Bermudian family’s most valuable possession, therefore keeping families in their homes, preserving communities, and maintaining the family unit is a priority. “Through these amendments, we will be putting Bermuda on par with many other jurisdictions, and most importantly, we are putting Bermudian families first. “Lending practices that intimidate and cause fear in those who aspire to a peaceful healthy financial future must end.”He said there was an “imbalance” between lenders and the public.“Agencies such as banks have a great deal of legal and financial clout as opposed to individuals and owners of small businesses,” Mr Roban said.“Most customers do not read and understand the entire contract, nor do they understand the terms. Often they are not informed that there are alternative solutions to address their financial challenges. This problem affects persons at all educational and financial levels.” The planned amendments will allow the minister responsible for consumer affairs the authority to make regulations relating to consumer protections for mortgages and loans, establishment of a tribunal to consider consumer complaints, introduce penalties for non-compliance with the regulations, and provide community education on lending. The planned code of conduct for lending agencies and officers will outline best practices for lending, define unfair customer treatment and unfair lending practices and introduce remedies in such cases. It will also set rules governing foreclosures, including the disposition of property and any shortfall, and will require lenders to clearly disclose to customers loan amount and payments, prepayment penalties, due dates and late charges, upfront fees, variable and fixed rates, payment default and foreclosures. Mr Roban highlighted some lending practices of concern. • A lender forecloses on a property and sells the home. The customer’s property was sold at fair market value and the net sales proceeds when applied to the principal balance left a shortfall of $100,000. The customer has been paying off the shortfall for approximately six years. “In a number of other jurisdictions, this practice has been discontinued, as banks have insurance to underwrite the writing-off of bad debts,” Mr Roban said. • A customer has a 30-year mortgage term and has made 180 payments on a regular and timely basis and is now in default. The lender could restructure the debt to lower the monthly mortgages repayment, or allow the property to be rented and set the interest rate very low, which can be changed to a higher rate when the customer’s financial position improves. “None of these remedies were considered and the customer was threatened with foreclosure,” Mr Roban said. • An owner who was in arrears and was trying to find a way to save his house from foreclosure. He submitted a long-term rental agreement where the rents could pay his monthly mortgage payment. The agreement was refused by the lender and the property was foreclosed. The property was later purchased by a senior member of the lending institution. Mr Roban added: “This government is committed to levelling the playing field and providing oversight accountability to ensure protections are in place to safeguard consumers from financial harm.” • To read Walter Roban’s statement in full, click on the PDF link under “Related Media”